Sunday, April 30, 2017

the key report of this past week was the advance estimate of 1st quarter GDP from the Bureau of Economic Analysis, which was released on Friday; other widely watched releases included the March advance report on durable goods and the March report on new home sales, both from the Census bureau, and the February Case-Shiller Home Price Index, which actually is a average of December, January and February relative home prices...Case Shiller’s Index indicated that home prices nationally for those 3 months averaged 5.8% higher than prices for the same homes that sold during the same 3 month period a year earlier….also released was the Chicago Fed National Activity Index (CFNAI) for March, a weighted composite index of 85 different economic metrics, which fell to +0.08 in March from +0.27 in February,after February's index was revised from the +0.34 reported last month...as a result, the 3 month average of that index fell to +0.03 in February, down from a revised +0.16 in February, which indicates that national economic activity has been close to the historical trend over recent months...

the week also saw the last three regional Fed manufacturing surveys for April: the Dallas Fed Texas Manufacturing Outlook Survey reported its general business activity composite index was unchanged at +16.8, indicating steady expansion of the Texas oil patch economy; the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reportedits broadest composite index slipped to +20, following last month's reading of +22, still indicating a robust expansion in that region's manufacturing, while the Kansas City Fed manufacturing survey for April, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index fell to +7 in April, down from readings of +20 in March and +14 in February, indicating a somewhat slower pace of growth in that region's manufacturing....

our economy grew at a 0.7% rate in the 1st quarter, the slowest pace in 3 years, as personal consumption of motor vehicles and services slowed, and the increase in private inventories decreased, even as fixed private investment grew at the fastest rate in five years...the Advance Estimate of 1st Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 0.7% annual rate over the output of the 4th quarter of 2016, when our real output grew at a 2.1% real rate...in current dollars, our first quarter GDP grew at a 3.0% annual rate, increasing from what would work out to be a $18,869.4 billion a year output rate in the 4th quarter to a $19,007.3 billion annual rate in the 1st quarter of this year, with the headline 0.7% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.3%, aka the GDP deflator, was applied to the current dollar change... as usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have now averaged +/-0.7% in either direction for nominal GDP, and +/- 0.6% for real (inflation adjusted) GDP before the third estimate for the quarter is released, which will be two months from now....also note that March construction and some March inventory data have yet to be reported, and that the BEA assumed a small increase in nonresidential construction, a small increase in residential construction, and a substantial increase in nondurable manufacturing inventories for March before they estimated 1st quarter output...also note that revised retail sales data were made available on Wednesday, too late to be incorporated into this report, which will shave another 0.2% off the the first quarter's growth rate when the second estimate of GDP is published at the end of May...

remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the advance estimate of 1st quarter GDP, which we find linked to on the sidebar of the BEA press release...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2013, table 2, which shows the contribution of each of the components to the GDP figures for those months and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...

personal consumption expenditures (PCE), which accounts for nearly 69% of GDP, grew at a 2.7% rate in current dollars in the 1st quarter, which became a 0.3% real growth rate of consumed goods and services after an annualized 2.4% PCE price index increase was used to adjust that spending for inflation....consumer outlays for durable goods fell at a 1.6% rate in current dollars while prices of those durable goods were on average 0.9% higher, and thus the BEA found real growth in output of consumer durables fell at a 2.5% rate, as a drop in real consumption of automobiles at a 16.1% rate more than offset increases in real consumption of furniture, appliances and recreational goods and vehicles...the BEA also found that real output of consumer non-durable goods grew at a 1.5% rate after increased consumer spending for non-durables at a 5.1% rate was adjusted for higher non-durable prices at a 3.6% rate, with decreased consumption of clothing and energy goods more than offset by greater growth of real consumption of food at home and other nondurables... meanwhile, the 2.6% nominal growth in consumer outlays for services was deflated by a 2.2% increase in prices for services to show real output of consumer services grew at a 0.4% annual rate, as a 2.3% decrease in the growth rate in real outlays for housing and utilities offset real growth in other services...as a result of these changes in growth from the 4th to the 1st quarter, the decrease in outlays for durable goods subtracted 0.19 percentage points from GDP, largely on a 0.45 percentage point hit from automobiles, while increased consumption of non-durable goods added 0.22 percentage points to the growth of GDP, and increased consumption of services added 0.21 percentage points to the growth rate of the 1st quarter economy..

the change in other components of the change in GDP are computed by the BEA in the same manner as PCE; ie, the actual annualized increase in current dollar spending for the quarter is adjusted with an inflation factor for that component, yielding the change in real units of goods or services produced in the quarter at an annual rate...thus, real gross private domestic investment, which had grown at a 9.4% annual rate in the 4th quarter of 2016, grew at a 4.3% annual rate from there in the 1st quarter...however, real growth in fixed investment grew at a 10.4% annual rate in the 1st quarter, after growing at a 2.9% rate in the 4th quarter, as real non-residential fixed investment grew at a 9.5% rate, and real residential investment grew at a 13.7% rate...real investment in non-residential structures grew at a 22.1% rate and added 0.55 percentage points to 1st quarter GDP, real investment in equipment grew at a 9.1% rate and added 0.49 percentage points to GDP, and real investment in intellectual property grew at 2.0% rate and added 0.08 percentage points to GDP, while the 13.7% growth rate of residential investment added 0.50 percentage points to GDP....for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3...

however, much slower growth in inventories reduced gross investment and hence GDP, as real private inventories grew by an inflation adjusted $10.3 billion in the quarter, down from the $49.6 billion of inflation adjusted inventory growth that we saw in the 4th quarter, and as a result the $39.2 billion slower real inventory growth subtracted 0.93 percentage points from the 1st quarter's growth rate, after $42.5 billion greater real inventory growth in the 4th quarter added 1.01 percentage points to that quarter's GDP....however, since slower growth in inventories indicates that less of the goods produced during the quarter were left in storage or "sitting on the shelf”, the decrease in their growth by $39.2 billion in turn means real final sales of GDP were actually greater by that much, and hence real final sales of GDP rose at a 1.6% rate in the quarter, after real final sales had only increased at a 1.1% rate in the 4th quarter, when the change in inventories was positive…

meanwhile, our real exports of goods and services rose at a 5.8% rate in the 1st quarter, after falling at a 4.5% rate in the 4th quarter of 2016, while our real imports rose at a 4.1% rate in the 1st quarter, after rising at a 9.0% rate in the 4th quarter...as you'll recall, real increases in exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted in GDP elsewhere), so the increase in 1st quarter exports added .68 percentage points to 1st quarter GDP...on the other hand, real increases in imports subtract from GDP because they represent either consumption or investment that was added to another GDP component that shouldn't have been, because it was not produced in our country and hence is not part of our national product….hence the 4.1% 1st quarter increase in real imports subtracted 0.61 percentage points from GDP, and therefore our improving trade balance added a net 0.07% percentage points to 1st quarter GDP, after a big increase in our trade deficit had subtracted 1.82% percentage points from GDP in the fourth quarter of last year...

finally, real consumption and investment by all branches of government shrunk at a 1.7% annual rate in the 1st quarter, after increasing at a 0.2% rate in the 4th quarter, as federal government consumption and investment fell at a 1.9% rate, while state and local consumption and investment fell at a 1.6% rate.....inflation adjusted federal spending for defense fell at a 4.0% rate and subtracted 0.16 percentage points from 1st quarter GDP growth, while real non-defense federal consumption and investment rose at a 0.9% rate and added 0.03 percentage points to GDP...note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of goods or services....meanwhile, state and local government investment and consumption expenditures fell at a 1.6% annual rate and subtracted 0.17 percentage points from the quarter's growth rate, as real growth in state and local consumption expenditures added 0.05 percentage points while shrinkage in real state and local investment at an 11.2 rate subtracted 0.22 percentage points from the quarter's growth...

we'll again include our FRED GDP graph, so you can picture how these GDP components all come together...in our FRED bar graph below, each color coded bar shows the real change, in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2013...in each quarterly grouping of seven bars on this graph, the quarterly changes in real (ie, inflation adjusted) personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and investment is shown in pink, and the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line...from this we can clearly see that the unusual collapse in real personal consumption expenditures was responsible for the weakness in the 1st quarter's growth rate, and that only the greatest growth in fixed private investment in five years kept the quarter's GDP growth rate from being negative...

March Durable Goods: New Orders Up 0.7%, Shipments Up 0.2%, Inventories Up 0.1%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for March (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $1.6 billion or 0.7 percent to $238.7 billion in March, after February's new orders were revised from the $235.4 billion reported last month to $237.1 billion, still 2.3% more than January's new orders…as a result, year to date new orders are now up by 3.4% from those of 2016...the volatile monthly new orders for transportation equipment were responsible for the month’s increase, as new transportation equipment orders rose $2.0 billion or 2.4 percent to $83.3 billion, on a 26.1% increase in new orders for defense aircraft and a 7.0% increase in new orders for commercial aircraft....excluding orders for transportation equipment, other new orders fell 0.2%, while excluding just new orders for defense equipment, new orders rose 0.1%....at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, rose 0.2% to $65.0 billion...

meanwhile, the seasonally adjusted value of March shipments of durable goods, which were included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, increased by $0.6 billion or 0.2 percent to $239.8 billion, after the value of February shipments increased 0.2% from January...higher shipments of transportation equipment led the March increase, as those shipments increased by $0.4 billion or 0.5 percent to $81.7 billion...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $0.5 billion or 0.1 percent to $385.7 billion, after end of February inventories were revised from $385.1 billion to $385.2 billion, still up 0.2% from January....

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but somewhat volatile new orders, rose for the 2nd consecutive month, increasing by $2.5 billion or 0.2 percent to $1,119.0 billion, after the nominal February decrease was revised to a 0.1% increase...a $1.6 billion or 0.2 percent to $755.5 billion increase to $752.7 billion in unfilled orders for transportation equipment led the overall increase, as unfilled orders excluding transportation equipment orders were also up 0.2% to $363,541 million...the unfilled order book for durable goods is still 0.9% below the level of last March, with unfilled orders for transportation equipment still 2.7% below their year ago level, mostly on a 3.6% decrease in the backlog of orders for commercial aircraft...

New Home Sales Reported Higher in March

the Census report on New Residential Sales for March (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 621,000 homes annually during the month, which was 5.8 percent (±15.5 percent)* above the revised February annual sales rate of 587,000 new home sales and 15.6 percent (±15.0 percent) above the estimated annual rate that new homes were selling at in March of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether March new home sales rose or fell from those of February, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales of new single family homes in February were revised from the annual rate of 592,000 reported last month to an annual rate of 587,000, and new home sales in January, initially reported at an annual rate of 555,000 and revised to a 558,000 rate last month, were revised up to a 585,000 a year rate with this report, while December's annualized new home sales rate, initially reported at an annual rate of 536,000 and revised from a revised 535,000 to a 530,000 a year rate last month, were again revised to a 551,000 rate with this release...

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 58,000 new single family homes sold in March, up from the estimated 48,000 new homes that sold in February and up from the 43,000 that sold in January .....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in March was $315,100, up from the median sale price of $293,100 in February and down from the median sales price of $311,400 in March a year ago, while the average new home sales price was $388,200, up from the $373,60 average sales price in February, and up from the average sales price of $367,700 in March a year ago....a seasonally adjusted estimate of 268,000 new single family houses remained for sale at the end of March, which represents a 5.2 month supply at the March sales rate, down from the 5.4 months of new home supply reported in February...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increase to 621,000 Annual Rate in March and A few Comments on March New Home Sales..

Industrial Production Up 0.5% in March on Return to Normal Temperatures

industrial production increased in March entirely on a jump in the seasonally adjusted output of utilities, which saw demand return to normal levels after record warm February temperatures across much of the US...the Fed's G17 release on Industrial production and Capacity Utilization for March reported that industrial production rose 0.5% in March after rising by a revised 0.1% in February, which left production 1.5% higher than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was at 104.1 in March, after the February index was revised down to 103.5 from 103.7 and the January index was revised down from 103.6 to 103.5...this month’s data now reflects the results of an annual revision on March 31st which left the IP indexes for most months about 1% lower than previously published numbers..

the manufacturing index, which accounts for more than 77% of the total IP index, fell to 102.9 in March, after the February index was revised from 103.6 to 103.3, the January index was revised from 103.1 to 103.0, and the December index was revised from 102.5 to 102.6...as a result, the manufacturing index now stands 0.8% above its year ago level, while first quarter manufacturing has grown at a 2.8% annual rate over that of the 4th quarter of 2016....meanwhile, the mining index, which includes oil and gas well drilling, rose 0.1%, from 106.0 in February to 106.1 in March, after the February index was revised down from 110.6, which left the mining index 2.9% higher than it was a year earlier...finally, the utility index, which typically fluctuates due to deviations from normal temperatures, rose by 8.6% in March, from 93.2 to 101.3, after the February utility index was revised from 93.4 to 93.2, down 5.8% from January...

this report also includes capacity utilization data, which is expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 76.1% in March from 75.7% in February, which was revised from the 75.4% reported last month and the the 75.9% reported in the annual revision ...capacity utilization of NAICS durable goods production facilities fell from a revised 75.3% in February to 74.6% in March, while capacity utilization for non-durables producers rose from a revised 76.9% to 77.0%...capacity utilization for the mining sector fell to 81.9% in March from 82.0% in February, which was previously reported as 80.5%, while utilities were operating at 75.7% of capacity during March, up from their 69.7% of capacity during February, which was previously reported at 70.9%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories..

March Housing Starts Reportedly Lower, New Permits Higher

the March report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were started at a seasonally adjusted annual rate of 1,215,000 in March, which was 6.8 percent (±12.5 percent)* below the revised estimated February annual rate of 1,303,000, but was9.2 percent (±9.1 percent) above last March's rate of 1,113,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell during March, with the figures in parenthesis the most likely range of the change indicated; in other words, March housing starts could have been up by 5.7% or down by as much as 19.3% from those of February, with revisions of a greater magnitude in either direction possible...in this report, the annual rate for February housing starts was revised from the 1,288,000 reported last month to 1,303,000, while January starts, which were first reported at a 1,285,000 annual rate, were revised from last month's initial revised figure of 1,251,000 annually to a 1,241,000 annual rate with this report....these annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 98,500 housing units were started in March, up from the 88,600 units that were started in February and the 82,300 units that were started in January..

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in March, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,260,000, which was 3.6 percent (±2.8 percent) above the revised February rate of 1,216,000 permits, and was 17.0 percent (±1.2 percent) above the rate of building permit issuance in March a year earlier...the annual rate for housing permits issued in January was revised up from the originally reported 1,213,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 111,900 housing units were issued in March, up from the revised estimate of 84,800 new permits issued in February.... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.215 Million Annual Rate in March and Comments on March Housing Starts...

Existing Home Sales 4.4% Higher in March

the National Association of Realtors (NAR) reported that existing home sales rose at a 4.4% rate from February to March on a seasonally adjusted basis, projecting that 5.71 million existing homes would sell over an entire year if the March home sales pace were extrapolated over that year, a pace that was also 5.9% above the annual sales rate projected in March of a year ago....the NAR also reported that the median sales price for all existing-home types was $236,400 in March, up from the revised $228,200 in February, and 6.8% higher than in March a year earlier, which they report as "the 61st consecutive month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Jumped 4.4% in March", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually happened during the month...this unadjusted data indicates that roughly 456,000 homes sold in March, up 44.8% from the 319,000 homes that sold in February, and up by 8.3% from the 421,000 homes that sold in March of last year, so we see the effect of a large seasonal adjustment....that same pdf indicates that the median home selling price for all housing types rose by 3.6%, from a revised $228,200 in February to $236,400 in March, while the average home sales price rose 3.3% to $278,500 from the $269,500 average sales price in February, while it was up 5.3% from the $264,400 average home sales price of March a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: "Existing-Home Sales Jumped 4.4% in March" and A Few Comments on March Existing Home Sales..

the consumer price index decreased by 0.3% in March, as lower prices for energy, wireless services, and most goods more than offset higher prices for groceries...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers fell 0.3% in March after it had risen 0.1% in February, 0.6% in January, 0.3% in December, 0.2% in November, 0.4% in October, 0.3% in September, and 0.2% in August....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually rose to 243.801 in March from 243.603 in February, which left it statistically 2.381% higher than the 238.132 index reading in March of last year...with lower prices for gasoline a major drag on the overall index, seasonally adjusted core prices, which exclude food and energy, fell by 0.1% for the month, with the unadjusted core index rising from 251.143 to 251.290, which left the core index 2.002% ahead of its year ago reading of 246.358...

the volatile seasonally adjusted energy price index fell by 3.2% in March, after it had fallen by 1.0% in February, but after it had risen by 4.0% in January, 1.5% in December, 1.2% in November, 3.5% in October, and 2.9% in September...hence, energy prices are still averaging 10.9% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were 6.0% lower in March, while the index for energy services fell by 0.3%, after rising 1.0% in February ....the drop in the energy commodity index included a 6.2% decrease in the price of gasoline, the largest component, and a 0.8% decrease in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, fell by an average of 0.3%…within energy services, the index for utility gas service fell by 0.8% in its first decrease after 8 increases, and hence utility gas is still priced 10.8% higher than it was a year ago, while the electricity price index was down 0.1%, after it rose 0.8% in February but was unchanged in December and January....energy commodities are still priced 19.8% above their year ago levels, with gasoline prices averaging 19.9% higher than they were a year ago.…meanwhile, the energy services price index is still 3.4% higher than last March, as even electricity prices have increased by 1.6% over that period..

the seasonally adjusted food price index rose 0.3% in March, after rising 0.2% in February, 0.1% in January, but after being unchanged for the 6 prior months, as prices for food purchased for use at home rose 0.5% while prices for food bought to eat away from home rose 0.2%, with average prices at fast food outlets up 0.2% while average prices at full service restaurants were 0.1% higher...in the food at home categories, the price index for cereals and bakery products increased by 0.3% as prices for flour and mixes were 1.4% higher...the price index for the meats, poultry, fish, and eggs group was also up 0.3% as pork prices rose 1.5% and poultry prices rose 1.0%, while the index for dairy products was 0.6% lower on 0.9% decrease in the price of cheese and a 0.7% price decrease for ice cream....the fruits and vegetables index was 1.6% higher on a 2.4% increase in prices for fresh fruits and a 1.1% increase in the index for processed fruits and vegetables....the beverages index was 0.1% lower as carbonated drink prices fell 0.5% and coffee prices were unchanged....lastly, prices in the ‘other foods at home’ category were on average 0.7% higher, as olives, pickles and relishes averaged a 3.6% increase and snacks rose 1.4%.....among food at home line items, only eggs, which are still priced 21.8% lower than a year ago, have seen price changes greater than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which fell by 0.1% in March after rising by 0.2% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.1% in September, 0.3% in August, 0.1% in July and by 0.2% in April, in May and in June, the composite of all goods less food and energy goods was down 0.3%, while the more heavily weighted composite for all services less energy services was 0.1% lower....among the goods components, which will be used by the Bureau of Economic Analysis to adjust March retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.1% as prices for furniture and bedding fell 0.8%...the apparel price index was 0.7% lower, led by a 3.2% decrease in prices for men's apparel....prices for transportation commodities other than fuel were down 0.4%, as prices for new vehicles fell 0.3% and prices for used cars and trucks fell 0.9%...prices for medical care commodities were 0.2% higher on a 0.6% increase in non-prescription drug prices....meanwhile, the recreational commodities index fell 0.3% on 0.8% lower prices for sport vehicles including bicycles and 1.5% lower priced toys, while the education and communication commodities index was 0.9% lower on 1.5% decreases in prices for both personal computers and telephones...lastly, a separate price index for alcoholic beverages was up 0.3% on 1.2% higher prices for whiskey bought for drinking at home, while the price index for ‘other goods’ was down 0.3% on a 0.6% increase in prices for personal care products...

within core services, the price index for shelter rose 0.1% on a 0.3% increase in rents and a 0.2% increase in owner's equivalent rent, offset by a 2.4% decrease in lodging away from home at hotels and motels, while the household operations services index was up 0.1%....the index for medical care services was also up 0.1% as hospital services rose 0.4% while eye care services fell 0.7%...meanwhile, the transportation services index was 0.4% higher on a 1.2% increase in motor vehicle insurance...in addition, the recreation services price index was up 0.2% as cable and satellite television and radio services rose 0.5%, while on the other hand, the index for education and communication services was 1.9% lower as charges for wireless telephone services were 7.0% lower...lastly, the index for other personal services was up 0.5% as tax return preparation and other accounting fees were 2.4% higher...among core prices, only televisions, which are now 18.9% cheaper than a year ago, and wireless phone services, which have now dropped 11.4% from a year ago, have seen prices drop by more than 10% over the past year, while nothing has seen prices rise by a double digit magnitude..

Retail Sales Down 0.2% in March after February and January Sales Revised Lower

seasonally adjusted retail sales decreased by 0.2% in March after retail sales for February were revised lower...the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $470.8 billion during the month, which was down 0.2 percent (±0.5%) from February's revised sales of $473.6 billion but still 5.2 percent (±0.9%) above the adjusted sales in March of last year...February's seasonally adjusted sales were revised down from $474.0 billion to $471.9 billion, while January's sales were revised down from $473.6 billion to $473.1 billion; as a result, the January to February change was revised up from up 0.1 percent (±0.5%) to down 0.3 percent (±0.2%).....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were up 14.9%, from $419,730 million in February to $482,257 million in March, while they were up 4.8% from the $460,093 million of sales in March of a year ago..

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the February Census Marts pdf...to once again explain what this table shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month's March "advance" report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called "preliminary") as of this report, with the new January to February percentage change under "Jan 2017 r" (revised) and the February 2016 to February 2017 percentage change as revised in the 2nd column of the pair...for your reference, our copy of this same table from last month’s advance February estimates, before this month's revisions, is here.... lastly, the third pair of columns shows the percentage change of the first 3 months of this year's sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of a year ago....

as we could see from the consumer price survey, this decrease in March retail sales was largely due to lower prices, since the composite price index of all goods less food and energy goods was down 0.3% for the month...certainly, there are areas of weakness and strength within that aggregate; as we can see, adjusted sales at motor vehicle dealers were down 1.5% to $87,845 million, and the 0.3% drop in prices of new vehicles and the 0.9% drop in prices of used vehicles only accounts for part of that….on the other hand, clothing store sales were up 1.0% while clothing prices were down 0.7%, which means that real clothing sales were up on the order of 1.7%...still, the downward revisions to January and February sales will put a statistically significant hit on previously reported personal consumption expenditures (PCE), which as we saw two weeks ago, were already on track to log the weakest contribution to GDP since the fourth quarter of 2009...

Producer Prices Down 0.1% in March on Lower Energy Prices

the seasonally adjusted Producer Price Index (PPI) for final demand fell 0.1% in March, as prices for finished wholesale goods decreased 0.1%, while margins of final services providers also decreased by 0.1%...this followed a February that indicated the PPI was 0.3% higher, with prices for finished wholesale goods up 0.3%, while margins of final services providers increased by 0.4%, and a January report that indicated the PPI was 0.6% higher, with prices for finished goods up 1.0% while final demand for services rose 0.3%....on an unadjusted basis, producer prices are now 2.3% higher than a year earlier, up from the 2.2% YoY increase indicated a month ago, for the largest year over year increase since March 2012...

as noted, the price index for final demand for goods, aka 'finished goods', fell by 0.1% in March, after rising by 0.3% in February, 1.0% in January, 0.6% in December, 0.1% in November, 0.3% in October, and 0.5% in September.. the index for wholesale energy prices fell 2.9%, the price index for wholesale foods rose 0.9%, and the index for final demand for core wholesale goods (ex food and energy) rose 0.4%...the largest wholesale energy price change was a 20.4% drop in wholesale prices for liquefied petroleum gas, while the wholesale food price index moved up on increases of 7.7% for fresh fruits and 7.1% for fresh and dry vegetables....among wholesale core goods, prices for industrial chemicals increased 2.6%, while wholesale prices for light trucks were up 1.3%..

meanwhile, the index for final demand for services fell by 0.1% in March, after rising by 0.4% in February, 0.3% in January, and by 0.1% in December, in November and in October, as the index for final demand for trade services was down 0.1%, the index for final demand for transportation and warehousing services fell 0.2%, while the index for final demand for services less trade, transportation, and warehousing services was 0.5% higher....among trade services, seasonally adjusted margins for apparel, footwear, and accessories retailers decreased 3.1% while margins for fuels and lubricants retailers rose 13.8%...among transportation and warehousing services, margins for truck transportation of freight were 0.4 lower...in the core final demand for services index, margins for loan services (partial) fell 4.1% and margins for securities brokerage, dealing, and investment advice fell 3.8%..

this report also showed the price index for processed goods for intermediate demand was 0.1% higher, after rising 0.4% in February, 1.1% in January, 0.4% in December, and by a revised 0.4% in November...prices for intermediate processed goods are now 5.3% higher than in March a year ago, the fifth year over year increase after 16 months of lower year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016.... in March, the price index for intermediate energy goods fell 2.7%, while prices for intermediate processed foods and feeds rose 0.6%, and the core price index for processed goods for intermediate demand less food and energy was 0.7% higher...

at the same time, the price index for intermediate unprocessed goods fell 4.2% in March, after falling 0.2% in February, but after rising 3.8% in January and 8.4% in December...the index for crude energy goods fell 14.6% as prices for raw natural gas fell 30.0% after falling 18% in February, while the price index for unprocessed foodstuffs and feedstuffs rose 0.8%, as the index for slaughtered chickens rose 5.8%...in addition, the index for core raw materials other than food and energy materials rose 2.0%, as wholesale prices for iron and steel scrap rose 6.9% and wholesale prices for paper scrap rose 14.9% ... this raw materials index is still up 12.7% from year ago, in contrast to a prior year over year decrease of 26.4% that we saw just 16 months ago, in November of 2015...

lastly, the price index for services for intermediate demand was 0.2% lower in March, after being 0.5% higher in February, 0.3% higher in January, 0.1% higher in December and 0.4% higher in November.. the index for trade services for intermediate demand was 0.3% higher as margins for hardware, building material, and supplies retailers rose 4.0%…the index for transportation and warehousing services for intermediate demand was also up 0.3%, as intermediate prices for air transportation of freight rose 1.1%...meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand fell 0.4%, as the intermediate price index for securities brokerage, dealing, and investment advice fell 6.8 percent...over the 12 months ended in February, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 1.7% higher than it was a year ago...

February Business Sales Up 0.2%, Business Inventories Up 0.3%

after the release of the March retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for February (pdf), which incorporates the revised February retail data from that March report and the earlier published February wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,360.7 billion in February, up 0.2 percent (±0.2 percent)* from January 's revised sales, and up 7.1 percent (±0.4 percent) from February sales of a year earlier...note that total January sales were concurrently revised up from the originally reported $1,359.3 billion to $1,357.8 billion, now a 0.3% increase from December....manufacturer's sales rose 0.3% to $479,959 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, fell 0.3% to $415,823 million, while wholesale sales rose 0.6% to $464,911 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,839.9 billion at the end of February, up 0.3 percent (±0.1%) from the end of January, and 2.8 percent (±0.3%) higher than in February a year earlier...at the same time, the value of end of January inventories was revised down from the $1,841.4 billion reported last month to $1,834.3 billion, still 0.3% higher than January, as there must have been an annual revision that we missed....seasonally adjusted inventories of manufacturers were estimated to be valued at $629,966 million, up 0.2% from January, and inventories of retailers were valued at $615,759 million, 0.3% more than in December, while inventories of wholesalers were estimated to be valued at $594,194 million at the end of February, 0.4% higher than in January...

Job Openings Up in February; Hiring, Job Quitting and Layoffs All Down

the Job Openings and Labor Turnover Survey (JOLTS) report for February from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 118,000, from 5,625,000 in January to 5,743,000 in February, after January job openings were revised from the originally reported 5,626,000...February's jobs openings were also 177,000 higher than the 5,743,000 job openings reported in February a year ago, as the job opening ratio expressed as a percentage of the employed rose from 3.7% in January to 3.8% in February, which was also from the 3.7% rate of February a year ago...(details on job openings by industry and region can be viewed in Table 1)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

privately issued reports released this week included the ADP Employment Report for March, the light vehicle sales report for March from Wards Automotive, which estimated that vehicles sold at a 16.53 annual rate in March, down from the 17.47 million rate in February, and also the lowest since a 16.4 million rate in October 2014, and the Mortgage Monitor for February(pdf) Black Knight Financial Services...in addition, the week saw both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the March Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 57.2% in March, from 57.7% in February, which still suggests a modest expansion in manufacturing firms nationally, and the March Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.2% in March, down from 57.6% in January, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in March...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally...

Employers Add 98,000 Jobs in March, Unemployment Rate Drops to 4.5%

the Employment Situation Summary for March showed the weakest payroll job growth in 10 months, even as the unemployment rate dropped and the employment rate rose…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 98,000 jobs in March, after the previously estimated payroll job increase for January was revised down from 238,000 to 216,000 and the payroll jobs increase for February was revised down from 235,000 down to 219,000…that means that this report represents a total of just 60,000 more seasonally adjusted payroll jobs than were reported last month, well below the past year's average of 182,000 jobs per month...the unadjusted data shows that there were actually 670,000 more payroll jobs extant in March than in February, as normal seasonal job increases in sectors such as construction, administrative and waste services, and leisure and hospitality were smoothed over by the seasonal adjustments…

seasonally adjusted job increases in March were weak but still spread through through both the goods producing and the service sectors, with only the retail sector dropping 29,700 jobs on a seasonally adjusted basis, as general merchandise stores cut 34,700 employees..the broad professional and business services sector added 56,000 jobs, as 16,800 more were employed in services to buildings and temporary help services added 10,500 workers....employment in health care rose by 13,500, with the addition of 8,700 jobs in hospitals...in addition, both the resource extraction and manufacturing sectors saw the addition of 11,000 jobs, with support activities for mining employing 8,800 more and metal fabrication factories adding 5,500....however, all the other major sectors, including construction, wholesale trade, transportation and warehousing, utilities, information, financial services, education, leisure and hospitality, and government, all saw little or no change in payroll employment over the month…

the establishment survey also showed that average hourly pay for all employees rose by 5 cents an hour to $26.14 an hour in March, after it had increased by a revised 7 cents an hour in February; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $21.90 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in February, while hours for production and non-supervisory personnel slipped to 33.5 hours after 7 months at 33.6 hours...in addition, the manufacturing workweek was down 0.2 hours at 40.6 hours, and average factory overtime decreased by 0.1 hours to 3.2 hours...

meanwhile, the March household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 472,000 to 153,000,000, while the similarly estimated number of those unemployed fell by 326,000 to 7,202,000; which thus meant a net 145,000 increase in the total labor force...since the working age population had grown by 168,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 23,000 to 94,213,000....with the increase of those in the labor force not much different than the increase in the civilian noninstitutional population, the labor force participation rate remained unchanged at 63.0%....at the same time, the increase in number employed as a percentage of the increase in the population was great enough to lift the employment to population ratio, which we could think of as an employment rate, 0.1% to 60.1%...at the same time, the decrease in the number unemployed was also large enough to decrease the unemployment rate from 4.7% to 4.5%....meanwhile, the number who reported they were involuntarily working part time fell by 151,000 to 5,553,000 in March, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 9.2% in February to 8.9% in March, the lowest since December 2007....

like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there...note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page..

February Trade Deficit Falls 9.6% on Lower Imports of Cars and Cell Phones

our trade deficit fell by 9.6% February, as the value of our exports increased while the value of our imports decreased....the Census report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit fell by $4.62 billion to $43.56 billion in February, from a January deficit that was revised from the originally reported $48.5 billion to $48.17 billion...the value of our February exports rose by $0.4 billion to $192.2 billion on a $0.4 billion increase to $128.5 billion in our exports of goods and an increase of less than $0.1 billion to $61.4 billion in our exports of services, while our imports fell $4.3 billion to $240.6 billion on a $4.2 billion decrease to $193.4 billion in our imports of goods and a less than $0.1 billion increase to $43.0 billion in our imports of services...export prices averaged 0.3% higher in February, so the real growth in exports was less than the nominal dollar value by that percentage, while import prices were 0.2% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage...

the increase in our February exports of goods came about as a result of higher exports of consumer goods, industrial supplies and of other goods, offset by decreases in our exports of foods and feeds and capital goods...referencing the Full Release and Tables for February (pdf), in Exhibit 7 we find that our exports of consumer goods rose by $665 million to $17,143 million on a $522 million increase in our exports of pharmaceuticals and a $222 increase in our exports of gem diamonds....our exports of industrial supplies and materials rose by $411 million to $38,397 million on a $604 million increase in our exports of fuel oil and a $407 million increase in our exports of crude oil, which were partially offset by a $388 million decrease in our exports of nonmonetary gold....in addition, our exports of automotive vehicles, parts, and engines rose by $196 million to $13,817 million, and our exports of other goods not categorized by end use rose by $540 million to $4,949 million...partially offsetting those increases, our exports of foods, feeds and beverages fell by $676 million to $10,552 million on a $578 million decrease in our exports of soybeans, and our exports of capital goods fell by $623 million to $42,874 million on a $628 million decrease in our exports of civilian aircraft and a $381 million decrease in our exports of engines for civilian aircraft, which were partially offset by a $244 million increase in our exports of semiconductors..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of consumer goods and passenger cars were largely responsible for the decrease in February imports...our imports of consumer goods fell by $3,064 million to $48,997 million on a $1,865 million decrease in our imports of cellphones, a $275 million decrease in our imports of gem diamonds, a $205 million decrease in our imports of nonwool or cotton clothing and textiles, and a $201 million decrease in our imports footwear...our imports of automotive vehicles, parts and engines fell by $2,648 million to $29,113 million on a $2,107 million decrease in our imports of new and used passenger cars, a $322 million decrease in our imports of vehicle parts other than engines and tires, and a $236 million decrease in our imports of trucks, buses, and special purpose vehicles...in addition, our imports of other goods not categorized by end use fell by $213 million to $7,390 million...offsetting those decreases, our imports of industrial supplies and materials rose by $1,389 million to $43,410 million, as our imports of crude oil rose by $1,672 million and our imports of gold rose by $294 million, our imports of foods, feeds, and beverages rose by $263 million to $11,532 million, and our imports of capital goods rose by $124 million to $51,217 million on a $495 million increase in our imports of computers...

to gauge the impact of January and February trade on 1st quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here....from that table, we can figure that 4th quarter real exports of goods averaged 121,037.7 million monthly in chained 2009 dollars, while inflation adjusted 1st quarter goods exports were at 124,083 million and 124,506 million for January and February respectively in that same 2009 dollar quantity index representation...averaging January and February goods exports and then annualizing the change between that average and the average of the fourth quarter, we find that the 1st quarter's real exports of goods are running at a 11.2% annual rate above those of the 4th quarter, or at a pace that would add about 0.92 percentage points to 1st quarter GDP.....in a similar manner, we find that our 4th quarter real imports of goods averaged 183,210.3 million monthly in chained 2009 dollars, while inflation adjusted January and February imports were at 189,184 million and 184,216 million respectively after that same adjustment...that would indicate that so far in the 1st quarter, our real imports of goods have increased at a 7.84% annual rate from those of the 4th quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 7.84% rate would thus subtract 0.90 percentage points from 1st quarter GDP....hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to add 0.02 percentage points to 1st quarter GDP...

Construction Spending Rose 0.8% in February after January Revised Higher

the Census Bureau's report on February construction spending (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,192.8 billion annually if extrapolated over an entire year, which was 0.8 percent (±1.0%)* above the revised annualized rate of $1,192.2 billion of construction spending for January and 3.0 percent (±1.5%) above the estimated annualized level of construction spending for February last year...the January spending estimate was revised 0.3% higher, from $1,180.3 billion to $1,183.84 billion, while December's construction spending was revised from $1,192.2 billion to $1,188.94 billion, which would suggest a small downward revision to 4th quarter GDP when the annual revisions are released later this summer...

private construction spending was at a seasonally adjusted annual rate of $917.36 billion in February, 0.8 percent (± 1.2 percent)* above the downwardly revised January estimate, with residential spending of $484.7 billion up 1.8% (±1.3 percent)* from the revised annual rate of $476.1 billion in January, while private non-residential construction spending of $435.3 billion was 0.3 percent (± 1.2 percent)* below the revised January estimate of $433.8 billion....meanwhile, public construction spending was estimated to be at an annual rate of $275.5 billion, 0.6 percent (±1.8 percent)* above the revised January estimate, with construction spending for public safety up 8.2% (±2.3%) to an annual rate of $8,021 million...

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments.... however, gauging the impact of the February spending that's reported here on GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP must be adjusted for changes in price...adding to the difficulty, the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators for the various components of non-residential investment, making an accurate estimate a real chore to undertake manually...so in lieu of trying to adjust for all of those different indices, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment...

that index showed that aggregate construction costs were down 0.1% in February, after they had increased by 0.3% in January, decreased by 0.1% in December and increased by 0.1% in November...on that basis, we can estimate that February construction costs were roughly 0.2% more than those of December, 0.1% more than those of November, and 0.2% more than October...we then use those relative percentages to inflate the lower cost spending figures for each of the 4th quarter months vis a vis February, which is arithmetically the same as adjusting higher priced January and February construction spending downward, for purposes of comparison....this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,188,941 in December, $1,191,468 in November, and $1,173,749 in October, while it was at $1,192,822 in February and $1,183,840 in January....thus to compare January's nominal construction spending of $1,183,840 and February's figure of $1,192,822 to inflation adjusted figures of the fourth quarter, our formula becomes:((1,192,822 + 1,183,840 *0.999)/2) / ((1,188,941 * 1.002 + 1,191,468 * 1.001 + 1,173,749 *1.002)/3) = 1.000883, meaning real construction spending over January and February was up by 0.0883% from that of the 4th quarter period, or up at a 0.35% annual rate...to figure the potential effect of that change on GDP, we take the difference between the 4th quarter inflation adjusted average and that of January's & February's adjusted spending as a fraction of 4th quarter GDP, and find that 1st quarter construction spending is rising at a rate that would add just about 0.02 percentage points to 1st quarter GDP, assuming there is little change in real construction in March..

this report also indicated that the seasonally adjusted value of February factory shipments rose for the 11th time in 12 months, increasing by $1.4 billion or 0.3 percent to $480.0 billion, following a 0.3% increase in January....shipments of durable goods were up $0.8 billion or 0.3 percent from January at $239.4 billion, revised from the $239.2 billion figure reported by the durables report last week...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods were up by $0.6 billion or 0.2 percent to $240.5 billion, after the value of January's shipments was revised from $239.5 billion to $240,529 million..

meanwhile, the aggregate value of February factory inventories rose for the 7th time in 8 months, increasing by $1.2 billion or 0.2 percent to $630.0 billion, after a January increase of 0.3% that was revised from the originally reported 0.2%...February inventories of durable goods increased in value by $0.8 billion or 0.2 percent to $385.2 billion, unchanged from the previously published figure, following a 0.1% increase in January durable inventories.....the value of non-durable goods' inventories rose by $0.3 billion or 0.1 percent to $244.8 billion, following a revised 0.6% increase in January non-durable inventories...to gauge the effect of these February inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories was statistically unchanged at $225,415 million in February; the value of work in process inventories was up 0.5% to $195,541 million, and materials and supplies inventories were valued 0.1% higher at $209,010 million...the February producer price index reported prices for finished goods increased 0.3%, prices for intermediate processed goods inventories were 0.4% higher, while prices for unprocessed goods were 0.2% lower....that would means that real finished goods inventories were roughly 0.3% lower, real inventories of intermediate processed goods were 0.1% higher, and real raw material inventory inventories were 0.3% higher..

February Wholesale Sales Up 0.6%, Wholesale Inventories Up 0.4%

the February report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $464.9 billion, up 0.6 percent (±0.4 percent) from the revised January level and 8.4 percent (±0.9 percent) higher than wholesale sales of January 2016... the January preliminary estimate of wholesale sales was revised from down 0.1 percent (±0.5 percent)* to up 0.3 percent (±0.7 percent)* in conjunction with an annual revision based on the results of the 2015 Annual Wholesale Trade Survey, which makes comparisons to previous published amounts nonsense.. February wholesale sales of durable goods rose 0.4% percent (+/-0.4%) from January and were up 7.3% prcent (+/-0.6%) from a year earlier, while wholesale sales of nondurable goods were up 0.7% percent (+/-0.2%) from January and were up were 12.4 percent (+/-0.9%) from last February...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold....

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this February report estimated that wholesale inventories were valued at $594.2 billion at month end, an increase of 0.4 percent (+/-0.2%) from the revised January level and also 3.2 percent (±0.7 percent) higher than February a year ago, with the January preliminary inventory estimate revised downward but still 0.2% lower than December....inventories of durable goods were valued 0.2 percent (+/-0.2%)* higher than January and were valued 1.7 percent higher than February a year earlier, while the value of wholesale inventories of nondurable goods was up 0.7 percent (+/-0.2%) from January and was up 5.6 percent from last February...with the February producer price index for finished goods up by 0.3% and producer prices for intermediate goods up by 0.3%, most real additions to February inventories appear to be minor, and should have little impact on 1st quarter GDP growth...

4th Quarter GDP Revised to Show Growth at a 2.1% Rate

the Third Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.1% rate in the 4th quarter, revised from the 1.9% growth rate indicated by the second estimate reported last month, as personal consumption expenditures and inventory investment were greater than was previously estimated, while losses from trade were worse than was previously estimated.....in current dollars, our fourth quarter GDP grew at a 4.2% annual rate, increasing from what would work out to be a $18,675.3 billion a year output rate in the 3rd quarter to a $18,869.4 billion annual rate in the 4th quarter, with the headline 2.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.1%, also known as the GDP deflator, was applied to the current dollar change...

remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 4th quarter GDP, which is linked to on the sidebar of the BEA press release...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since 2012, table 2, which shows the contribution of each of the components to the GDP figures for those months and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...the pdf for the 2nd estimate for the 4th quarter, which this estimate revises, is here...

real personal consumption expenditures (PCE), the largest component of GDP, were revised to show growth at a 3.5% annual rate in the 4th quarter, rather than the 3.0% growth rate reported last month, as a 5.5% increase in the growth rate of personal spending was deflated with an annualized 2.0% increase in the PCE price index, an inflation adjustment which was revised from the 1.9% PCE price index reported in the second estimate....real consumption of durable goods grew at a 11.4% annual rate, revised from 11.5% in the second estimate, and added 0.82 percentage points to GDP, as real output of motor vehicles rose at a 16.2% annual rate and accounted for 0.39 of that growth....real consumption of nondurable goods by individuals rose at a 3.3% annual rate, revised from the 2.8% increase reported in the 2nd estimate, and added 0.47 percentage points to 4th quarter growth, as lower real consumption of energy goods was the only drag on the quarter’s non-durables growth....meanwhile real consumption of services rose at a 2.4% annual rate, revised from the 1.8% rate reported last month, and added 1.11 percentage points to the final GDP tally, as an increase in the real output of health care services at a 5.6% rate accounted for more than half of the 4th quarter increase in services...

seasonally adjusted real gross private domestic investment grew at a 9.4% annual rate in the 4th quarter, revised from the 9.2% growth estimate made last month, as real private fixed investment was revised from growth at a 3.2% rate to growth at a 2.9% rate, while real inventory growth was greater than previously estimated...investment in non-residential structures was revised from shrinking at rate of 4.5% to shrinking at a 1.9% rate, while real investment in equipment grew at a 1.9% rate, unrevised from the 2nd estimate....meanwhile, the 4th quarter's investment in intellectual property products was revised from growth at a 4.5% rate to growth at a 1.3% rate, while the growth rate of residential investment was also statistically unrevised at 9.6% annually…after revisions, the decrease in investment in non-residential structures subtracted 0.05 percentage points from the economy's growth rate, investment in equipment added 0.11 percentage points, investment in intellectual property added 0.05 percentage points , and growth in residential investment added 0.35 percentage points to the change in 4th quarter GDP...

meanwhile, the growth in real private inventories was revised from the previously reported $46.2 billion in inflation adjusted growth to show inventory growth at an inflation adjusted $49.6 billion rate, which came after inventories had grown at an inflation adjusted $7.1 billion rate in the 3rd quarter, and hence the $42.5 billion positive change in real inventory growth from the 3rd quarter added 1.01 percentage points to the 4th quarter's growth rate, revised from the 0.94 percentage point addition to inventory growth reported in the second estimate....since growth in inventories indicates that more of the goods produced during the quarter were left in a warehouse or sitting on the shelf, their increase by $42.5 billion meant that real final sales of GDP were actually smaller than GDP by that much, and hence real final sales of GDP grew at a 1.1% rate in the 4th quarter, compared to the real final sales increase at a 3.0% rate in the 3rd quarter, when the change in inventories was smaller....

the previously reported decrease in real exports was revised lower with this estimate, while the reported increase in real imports was revised higher, and as a result our net trade was a greater subtraction from GDP than was previously reported...our real exports fell at a 4.5% rate, rather than at the 4.0% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their shrinkage subtracted 0.55 percentage points from the 4th quarter's growth rate....meanwhile, the previously reported 8.5% increase in our real imports was revised to an 9.0% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their growth subtracted 1.27 percentage points from 4th quarter GDP....thus, our weakening trade balance subtracted a net 1.82 percentage points from 4th quarter GDP, revised from the 1.70 percentage point GDP subtraction resulting from foreign trade that was indicated in the second estimate..

finally, there was also a downward revision to real government consumption and investment in this 3rd estimate, as the real growth rate for the entire government sector went from a 0.4% rate to a 0.2% rate...real federal government consumption and investment was statistically unchanged, however, as real federal spending for defense shrunk at a 3.6% rate and subtracted 0.14 percentage points from 4th quarter GDP, while all other federal consumption and investment grew at a 2.3% rate and added 0.06 percentage points to GDP.....note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services...meanwhile, real state and local consumption and investment was revised from growth at a 1.3% rate in the 2nd estimate to growth at a 1.0% rate in this estimate, as state and local investment spending grew at a 3.3 rate and added 0.11 percentage points to 4th quarter GDP, while state and local consumption spending was little changed and had no statistical impact on GDP...

our FRED bar graph for GDP below has been updated to reflect these latest GDP revisions...each color coded bar shows the real inflation adjusted change, expressed in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2013...in each quarterly grouping of seven bars on this graph, the quarterly changes in real personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in real private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and investment is shown in pink, and the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are therefore shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, they'll appear below the zero line.....it's clear that the drop in exports and the surge in imports were the major negatives in the 4th quarter, and that with the increases in personal consumption expenditures, investment and inventories, the 4th quarter could have topped the third had our trade deficit merely remained flat..

Personal Income up 0.4% in February, Personal Spending up 0.1%, PCE Price Index up 0.1%

as you can see from the GDP chart above, our personal consumption expenditures (PCE) in blue are usually the major metric for determining the ultimate trajectory of GDP each quarter, and hence the key monthly release that inputs into GDP each quarter is the report on Personal Income and Outlays from theBureau of Economic Analysis, which gives us the monthly data on our personal consumption expenditures (PCE) and the monthly PCE price index, which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated...this report also gives us monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics are not the current monthly change; rather, they're seasonally adjusted and at an annual rate, ie, in February's case, this report tells us what income and spending would be for a year if February's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, and in the case of this month's report they give us the percentage change in each annual metric from January to February...

thus, when the opening line of the press release for this report tell us "Personal income increased $57.7 billion (0.4 percent) in February", that means that the annualized figure for personal income in February, $16,438.5 billion, was $57.7 billion, or a bit less than 0.4% greater than the annualized personal income figure of $16,380.8 billion for January; the actual change in personal income from January to February is not given...similarly, annualized disposable personal income, which is income after taxes, rose by a bit more than 0.3%, from an annual rate of an annual rate of $14,357.6 billion in January to an annual rate of $14,402.2 billion in February...the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in February, the largest contributors to the $57.7 billion annual rate of increase in personal income were a $40.7 billion increase in wages and salaries and a $6.0 billion increase in rental income…

for the personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased at a $7.4 billion rate, or by less than 0.1 percent, as the annual rate of PCE rose from $13,098.6 billion in January to $13,106.0 in February, after the January PCE figure was revised up from the originally reported $13,065.8 billion annually...the current dollar increase in February spending resulted from a $9.4 billion annualized increase to $8,874.9 billion in annualized in spending for services, which was partially offset by a $1.3 billion decrease to $4,231.1 billion in spending for goods....total personal outlays for February, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $7.5 billion to $13,594.2 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $808.0 billion annual rate in February, up from the revised $770.9 billion in annualized personal savings in January... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 5.6% in February from January's savings rate of 5.4%...

before personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....the BEA does that with the price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, also included in this report....looking at Table 9 in the pdf, we see that that index rose from 112.102 in January to 112.248 in February, a month over month inflation rate that's statistically 0.1302%, which BEA reports as an increase of 0.1 percent, following the PCE price index increase of around 0.4% in January...applying that inflation adjustment to the nominal amount of spending left real PCE statistically 0.1% lower in February, after January's real PCE increase was revised to down 0.2% from the previously reported 0.3% decrease...note that when those price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in our familiar chained 2009 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....that result is shown in table 7 of the PDF, where we see that February's chained dollar consumption total works out to 11,676.1 billion annually, nearly 0.1% less than January's 11,684.8 billion...

finally, to estimate the impact of the change in PCE on the change in GDP, we have to compare real PCE from January and February to the the real PCE of the 3 months of the fourth quarter....while this report shows PCE for all those months on a monthly basis, the BEA also provides the annualized chained dollar PCE on a quarterly basis in table 8 in the pdf for this report, where we find that the annualized real PCE for the 4th quarter was represented by 11,669.8 billion in chained 2009 dollars..(that's the same figure shown in table 3 of the pdf for the 4th quarter GDP report)...by averaging the annualized chained 2009 dollar figures for January and February, 11,684.8 billion and 11,676.1 billion, we get an equivalent annualized PCE for the two months of the 1st quarter that we have data for so far....when we compare that average of 11,680.45 to the 4th quarter real PCE of 11,669.8, we find that 1st quarter real PCE has grown at a 0.365% annual rate for the two months we do have (note the math to get that annual rate: (((11 684.8 + 11 676.1) / 2) / 11 669.8)^4 = 1.00365545...that means that if March real PCE does not improve from the average of January and February, growth in PCE would add just 0.25 percentage points to the growth rate of the 1st quarter, which would be the weakest contribution from PCE since the fourth quarter of 2009...

note on the graphs used here

in March a year ago the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs before then...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all created and stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....